Rubicon Project Tells Investors It Was Slow To React To Header Bidding

Rubicon Project CEO Frank Addante told investors on Tuesday that the company was slow to recognize the importance of header bidding to its publisher customers.

As a result, desktop managed revenue declined 2% in Q2. That unexpected drop led Rubicon to lower its revenue guidance for the year.

Rubicon’s FastLane header bidding product did not enter the market until last October, months after the technology's emergence had been documented by AdExchanger.

Meanwhile, publishers began adopting other SSPs' solutions in earnest, siphoning away impressions from Rubicon. That happened even though Rubicon lost no customers.

When it saw unexpected declines in desktop revenue, header bidding emerged “as a clear indicator that there was some leakage in impressions,” President Greg Raifman said. The company underwent a strategic review to figure out what went wrong.

Rubicon had been focused not on header bidding and its desktop business, but on the growing areas of mobile and video. “We swung the pendulum too far in mobile and video direction,” Addante said. It had also invested resources in its orders business, an area it expects to grow over the long term.

Plus, Rubicon had reason to think header bidding wouldn’t be big. It had already tried to create a header bidding-like product back in 2012, called real-time pricing. Only a half-dozen publishers ended up adopting it. “It didn’t work out, so when we saw header bidding, we didn’t think it would accelerate as quickly as it has,” Addante said.

Rubicon Project has weathered other transitions, namely the shift from SSPs serving as ad network optimizers (the static bid business it’s retiring in Q3) to bringing in real-time demand. Back in 2011, Addante told AdExchanger that RTB was “doing really well in beta.” But Admeld (now Google) and PubMatic were processing real-time bids in 2009, making it late to that marketplace trend too.

Raifman defended FastLane’s late entry. “We had the approach we will not be first to market, we will be best to market,” he said.

Catching up will take the rest of the year, Rubicon predicted. It highlighted ways it’s already trying to accelerate adoption of its FastLane product.

Raifman said that managed revenue from its FastLane header bidding solution stood at 13% in June. At the beginning of the year, that number was less than 1%. By the end of the year, it expects revenue from FastLane to contribute more than 20% to total ad spend.

Rubicon is also adding FastLane to publishers’ websites as fast as it’s able, diverting resources and focusing its salespeople and sales engineers on the task. It was able to accelerate integration time – which is often slow because of header bidding’s complexity and potential latency issues – by 22% from Q1 to Q2, Raifman said.

Its team has now installed FastLane with 130 publishers, which collectively operate 750 websites.

Its intent marketing business, which it entered via the Chango acquisition, is seeing pressure from “agency-owned tech,” Raifman said, leading to “challenges in the intent marketing business.” Chango is lowering its fees as part of its go-to-market plan, and transitioning away from the managed service model to one it’s dubbing “guaranteed audiences.”

Despite the turmoil from marketplace changes, the company maintained overall growth.

Net revenue grew 34% to $65.1 million in the second quarter, while managed revenue grew 13% to $257.4 million. And it reduced its net loss to $2.7 million, from an $11.9 million loss in Q2 2015. Additionally, Rubicon's adjusted EBITDA margin doubled, from 14% to 28%, likely an effect of its purchase of Chango.